capitalism

Market Failure 315
Mandeville had good reason to characterize The Fable of
the Bees as “a rhapsody void of order or method.” Written
over a period of 24 years, it began as a brief poem, “The
Grumbling Hive: or, Knaves Turn’d Honest” (1705). In later
years (beginning in 1714), Mandeville appended a number of
essays, remarks, and dialogues to subsequent editions until
what began as a poem of 433 lines came to fill two substantial
volumes. This later material includes two important theoretical
essays, “An Enquiry into the Origin of Moral Virtue”
and “A Search into the Nature of Society.” Six dialogues that
comprise the second volume are extended commentaries on
the themes presented in “The Grumbling Hive.”
“The Grumbling Hive” is an allegory extolling the social
benefits of self-interested actions, such as avarice, greed,
and other traditional vices. It is not always clear, however,
what Mandeville is claiming when he notes that “private
vices” produce “public benefits.” He depicts the hive as a
limited monarchy in which the King’s power “was circumsrib’d
by Laws.” In the “Moral” of the poem, Mandeville
states:
So Vice is beneficial found,
When it’s by Justice lopt and bound
This couplet suggests that Mandeville regarded as
socially beneficial only those vices that do not violate the
rules of justice. This interpretation was given by F. B. Kaye
in his definitive edition of the Fable, which was published
in 1924. Kaye writes:
Vices are to be punished as soon as they grow into crimes,
says Mandeville....[T]he real thesis of the book is not that
all evil is a public benefit, but that a certain useful proportion
of it (called vice) is such a benefit (and . . . is on that
account not really felt to be evil, though still called vicious).
This interpretation is somewhat problematic, however,
because Mandeville also discusses the social benefits of
unjust actions, such as theft and fraud, which provide
employment for those in the criminal justice system, as
well as for those artisans and laborers who are needed to
replace goods that have been destroyed or stolen.
The ambiguities in Mandeville’s poem (which also
appear in his explanatory essays) partially account for the
hostile reception the work later received even from those
who sympathized with its defense of self-interest. For
example, in The Theory of Moral Sentiments, Adam Smith
notes that Mandeville’s arguments “in some respects bordered
upon the truth” despite “how destructive this system
may appear.”
Although Kaye and other commentators have described
Mandeville as an early proponent of free trade, he is more
accurately described as a mercantilist inasmuch as he
believed that a government should ensure a favorable
balance of trade. Whatever his position on the issue of
trade, however, it is generally accepted that Mandeville was
an early sympathizer to the tenets of laissez-faire.
One of Mandeville’s most influential arguments was his
defense of “luxury,” which had been widely condemned for
its supposedly enervating effects on social mores. Many of
Mandeville’s comments about the economic benefits of
luxury, as well as his criticism of this concept as being
excessively vague, would later reappear in the writings of
David Hume, Edward Gibbon, Adam Smith, and other liberal
individualists.
Less popular was Mandeville’s psychological egoism,
that is, his claim that all actions, even those virtuous
actions that appear altruistic or disinterested, are ultimately
motivated by self-interest. It was largely owing to
this thesis that Mandeville (like Thomas Hobbes before
him) was widely condemned as an enemy of morality.
Mandeville responded to these charges by claiming that
he was observing human behavior as it really is, not prescribing
how it should be.
See also Capitalism; Civil Society; Ferguson, Adam; Natural
Harmony of Interests; Republicanism, Classical; Smith, Adam
Further Readings
GHS
Hundert, E. J. The Enlightenment’s Fable: Bernard Mandeville and
the Discovery of Society. Cambridge: Cambridge University
Press, 2005.
Mandeville, Bernard, and E. J. Hundert. The Fable of the Bees: And
Other Writings. New York: Hackett, 1997.
Primer, I. Mandeville Studies: New Explorations in the Art and
Thought of Dr. Bernard Mandeville. New York: Springer, 1975.
MARKET FAILURE
Market failure arguments lie at the root of a number of
arguments supporting government intervention in the economy.
A claim of market failure, by its nature, suggests some
reason that voluntary, private institutions cannot produce
valuable goods and services to the appropriate extent.
These arguments fall into several categories, but most commonly
center on the issues of public goods and externalities.
Sometimes the phrase “collective action problems”
serves as a more general rubric for what are perceived as
failures of the market to deal with specific issues.
There are two aspects to the problem of public goods. The
first, “nonrivalry,” suggests that an additional person can consume
a good without infringing on the consumption of others.
For instance, if a movie theater is not full, another viewer can
be admitted at little or no social cost. “Nonexcludability” suggests
that it is hard to charge individuals for a particular good